The average long-term U.S. mortgage rate inched up once again this week, maintaining its highest level since July. According to mortgage giant Freddie Mac, the benchmark 30-year fixed rate loan rate increased to 6.93% from 6.91% last week and stood at 6.66% a year ago. This marks the fourth consecutive week of increases in mortgage rates.
The rise in the cost of home loans is a reflection of the uptick in bond yields that lenders use as a reference to price mortgages, specifically the yield on the U.S. 10-year Treasury. From mid-September, the yield on the 10-year Treasury has climbed from 3.62% to 4.66% this week.
This surge coincides with a steady increase in home prices. The combination of elevated mortgage rates and escalating home prices has made homeownership prohibitive for many potential homebuyers. While sales of previously owned U.S. homes saw an uptick in November for the second consecutive month, the housing market continues to experience a downturn and appears to be on course for its most challenging year since 1995.
The government’s upcoming report on December home sales is eagerly awaited later this month. Interest rates have been on the rise following the Federal Reserve’s indication last month that it anticipates only two rate hikes this year, a reduction from the four cuts predicted in September.
The Federal Reserve’s decision to curb rate reductions stems from concerns over inflation persistently exceeding the central bank’s 2% target, despite a decline from its peak in mid-2022. Economists are also apprehensive about the potential impact of President-elect Donald Trump’s economic strategies, particularly his proposal to significantly increase tariffs on imports, which could further fuel inflation.
The average rate on a 15-year fixed-rate mortgage, favored by homeowners looking to refinance, edged up to 6.14% from 6.13%, also marking the highest level since July. A year ago, the rate stood at 5.87%, as reported by Freddie Mac.
